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My Realtor is Acting as a Dual Agent – What Does That Mean and Why Should I Care?

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If you are in the hunt for a house, or likewise selling your own, the topic of dual agency will (or should) come up for discussion with your agent.  Most people give consent for their agent to act as a dual agent if the opportunity arises, but do you really know what that consent means?

Under New Jersey law a disclosed dual agent works for both the Buyer and Seller. To work as a dual agent, a brokerage firm must first obtain the informed written consent of their client. It is not necessary that the agent representing both Buyer and Seller be the same person, rather dual agency runs to the brokerage firm. This means if your agent is with one of the handful of large brokerage firms in the area, it is more likely that your transaction will be one in which dual agency applies.

The agent affiliated with a brokerage working as a disclosed dual agent must carefully explain to each party that, in addition to working as their agent, the brokerage firm will also work as the agent for the other party. The agent must also explain what effect working as a disclosed dual agent will have on the fiduciary duties their brokerage firm owes to both the Buyer and Seller.

Dual agency gets tricky in a transaction when the agent is aware of confidential information that would benefit one party and negatively impact the other. A brokerage firm must have the express written permission prior to disclosing confidential information of one client, to the other.

Examples of confidential information includes the highest price a Buyer can afford to pay and the lowest price a Seller will accept. It also includes either party’s motivation to buy or sell. Remember, a brokerage firm acting as a disclosed dual agent will not be able to place one party’s interests ahead of those of the other party and cannot advise or counsel either party on how to gain an advantage at the expense of the other party because of such confidential information.

So why should you care? Well, it’s not likely you’ll be able to avoid a dual agency relationship, and you should not necessarily try to do so. If your agent is a dual agent, it means perhaps it was internal advertising that brought a Buyer to you for your home; but, it does mean you should strongly consider being represented by an attorney in a dual agency transaction. It is the only way to ensure you have an advocate protecting your interests up to and at the time of settlement.

Questions? Feel free to give us a call.

But I Have a Realtor, Do I Really Need An Attorney?

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Every real estate transaction is different and the simple answer is: it depends. For example, in South Jersey, real estate transactions are conducted much differently than in North Jersey. So the first question is, where is the property located? If the Seller is a Giants or Jets fan, you should probably have an attorney. Eagles fans, or in other words, properties located below New Jersey Route 195 are divided on the need for representation. So for you Eagles fans out there, let’s take a look at the options:

For the Buyers:
-Is the property a distress, bank owned or short sale?
-Is the property part of an estate sale?
-Is it a commercial property?
-Is there something about the property that leaves you uneasy such as potential structural issues?
-Is it a shore property with new FEMA maps under consideration or an area you simply are not familiar with?
-Are you an out-of-town buyer?

For the Sellers:
-Are you selling a property in distress?
-Are you selling a property left to you in an estate?
-Is your co-owner no longer on speaking terms with you?
-Do you know something about the property that you are unsure how to disclose?

It should become much clearer to you now when you should hire an attorney to close your real estate deal because if you answered yes to any of the above questions, then hiring an attorney to guide you through the process would be prudent. If none of those situations apply to you, then you are probably fine to use your Realtor’s knowledge and expertise to take you through to closing. As part of a Realtor’s New Jersey licensing education they are taught the real estate contracts used within the state, and New Jersey also provides you with a three-day “attorney review period” should you change your mind, and decide to hire counsel. New Jersey also requires continuing education courses for licensed Realtors and/or certifications on subjects such as ethics, buyer’s agency, distressed property sales, etc. These measures are in place to protect all parties, buyers, sellers as well as agents. Finally, if your Realtor is acting as a disclosed dual agent, and happens to be the agent that brought the Buyer to your sale (or vice versa), it is also a good idea to consider representation. The minimal fee an attorney charges for what is typically the largest transaction in a consumer’s life, is well worth the protection of hiring an advocate whose only duty of loyalty it to you.

But what if you are selling a distressed property and you decide you need counsel. Your neighbor’s nephew is an attorney and looking for business, so maybe you should just hire her – at a minimal fee – or better yet – she may do it for free!

Of course you can hire whomever you like, but remember if you think you need an attorney for your transaction, it is probably best to hire someone with experience in that particular area of law. I have seen relatively uneventful transactions turn into not only blown up deals, but litigation where “Aunt Nancy” the criminal attorney doing a favor for her nephew makes unreasonable changes to the contract pushing the seller to cancel the deal. Or worse, when “my friend the divorce attorney” puts together the sale of his long-time friend’s commercial property – and doesn’t properly address environmental issues resulting in years of litigation. A penny saved is not always a penny earned.

Hiring a real estate attorney when needed is a smart choice. Their mission is to negotiate to make this transaction come together in a peaceful manner that is fair and amenable to both sides. A real estate attorney takes over after the selling price and terms have been established by the Realtors in the contract and all parties have signed off. He will review the contract itself, negotiate repairs based on the home inspection report, and collaborate with the title company. He will also be with you at settlement along with your Realtor and usually your mortgage broker. Think of these people, all working for you and in your best interest.
Finally, hiring a real estate attorney can typically cost from $800 – $1,000 depending on the transaction. For the die hard bargain shoppers, we are probably not a good match and I most sincerely wish you all the best. Maybe things will go smoothly and maybe they won’t, but the purchase or sale of real estate is a significant transaction that I do not recommend you enter into without experienced guidance.